Despite the hype, the Internet's impact on business processes is
still patchy. Sure, there has been massive investment in enterprise
resource planning (ERP) systems, sophisticated customer
relationship management solutions and e-marketplaces. But one
function - finance - appears to lurk in the dark ages.
Isn't it incongruous that a chief executive's weekly broadcast can
be streamed through people's personalised Web portals, but it still
takes 10 accounts clerks up to two weeks to process an
invoice?
In most organisations, a finance department's working day still
revolves around budget reports, expense forms and credit control.
Even though some of its processes are automated, it is reckoned
that more than 60% of a finance department's operational costs go
on time-consuming paperwork. This is hardly strategic.
The thinking company's answer is to use the Internet and other
technologies to exploit potential that is locked into legacy
systems. Not only does this enable the finance department to add
value to decision making by providing near real-time management
information, but it typically cuts costs too. Gone is low-tech,
manual transaction processing, and in its place comes a
"lights-out" approach, where information extraction and processing
is handled electronically, 24 hours a day, with minimal human
intervention.
Companies committed to bringing their finance functions into the
21st century are embracing developments such as neural network
technology to streamline financial processes. For example, advanced
optical character recognition (OCR) technology extracts information
and turns it into reports that can be sent to either a desktop
portal or personal digital assistant. The real benefit arises from
the seamless integration of document management and e-procurement
systems with an existing ERP system.
The automation of employee expense processing is another popular
first step towards the greater efficiencies promised by e-finance.
Online data capture, report submission and approval reduces
paperwork. Rules "intelligently" embedded in the system allow
finance staff to focus on exceptions, rather than broader, more
time-consuming auditing. Integration with a company's reimbursement
and general ledger systems permits faster payment. And data
analysis enables immediate identification of overspends, as well as
opportunities for savings and potential deals with global
suppliers.
According to research by American Express, travel and entertainment
is now the second largest controllable expense in companies behind
salaries, with the average paper claim costing nearly £25 to
process, compared with a £7 cost for electronic handling.
A good example of a company already realising such savings is US
retailer JC Penney, which has implemented Concur's
e-expenses solution over its corporate intranet. Expense data is
pre-populated directly via a corporate charge card, and all
approvals, auditing and analysis take place online. As a result,
the company has cut 30,000 hours per year from the time taken to
process its 60,000 annual expense claims.
Before long, all finance processes will be similarly e-enabled. The
benefit for companies is that they will be able to operate at Net
speed. And finance departments themselves will be transformed from
production line to control room.
With more than 80% of transactions processed automatically and
customised performance management information delivered to
managers' desks with little or no human intervention, the finance
function will at last be freed to assume the strategic
decision-support role that today's chief executive demands.
Peter Scott is a partner at KPMG Consulting